Join our community of smart investors

Planning a shake up

BUDGET 2011: Liberalising Britain's infamously tight planning laws may not help property companies.
March 23, 2011

Britain's nimbyist hostility to development is well known; but the chancellor wants to change that so the "default answer to development is yes".

That's mixed news for property companies. On the plus side developers may be able to save on paperwork: the government has promised to "streamline" the planning-application regime, including a new 12-month guarantee for processing the paperwork. It will also consult on proposals to convert commercial land to residential more easily and will pilot a new model for land auctions, starting with public-sector land.

But the plans won't please everyone. Making property development easier weakens the market position of the incumbent players and their portfolios. One of the reasons Britain is seen as an attractive destination for property investment is the intransigence of the planning authorities, which keeps plots valuable and rents buoyant. Moreover, a more liberal planning regime may not go down well with grass-roots Tories in rural England - though the Budget document stressed existing controls on greenbelt land would be retained.

As usual the Budget opens more questions than it answers. The coalition's commitment to localism - which includes binning central construction targets and transferring decision-making powers to local authorities - is particularly hard to square with a new fast-track era for planning permission. And FirstBuy, a new programme to make £250m of equity funding available to first-time buyers, may not benefit the housebuilders as much as they hope. Not only do they have to help the government fund it, but extending equity to householders is also a very risky business - particularly as a liberalised planning regime for housebuilding might put further downward pressure on the already weak housing market.